1. © 2015 National Life Group ® National Life Insurance Company ® | Life Insurance Company of the Southwest ® National Life Group is a trade name of National Life Insurance Company, Montpelier, VT, Life Insurance Company of the Southwest (LSW), Addison, TX and their affiliates. Each company of NL Group is solely responsible for its own financial condition and contractual obligations. LSW is not an authorized insurer in New York and does not conduct insurance business in New York. This information is not intended as tax or legal advice. For advice concerning your own situation, please consult with your appropriate advisor. TC88230(0116)3 DOES THIS CONCERN YOU? RETAINED EARNINGS AND TAXES in a C CORPORATION

2. © 2015 National Life Group ® YOUR FAMILY PRODUCTS AND SERVICES BUSINESS COSTS PROFITS OWNERS / KEY PEOPLE Income Business Value Benefits

3. © 2015 National Life Group ® Problems May Be Lurking 3 PROFITS PRODUCTS AND SERVICES BUSINESS COSTS OWNERS / KEY PEOPLE

4. © 2015 National Life Group ® Retained Earnings 4 Percentage of net earnings retained by business and not paid out as dividend. May also be increased by other asset value increases. 1 Recorded under shareholders’ equity on the balance sheet. 2

5. © 2015 National Life Group ® 5 PROFITS May become Retained Earnings A Regular C Corporation can accumulate up to $250,000 A Personal Service Corporation taxed as a C Corporation can accumulate up to $150,000 Amounts in excess must be for reasonable business needs

6. © 2015 National Life Group ® 6 PROFITS Excess Retained Earnings Accumulated Earnings Tax Dividend Treatment

7. © 2015 National Life Group ® Excess Retained Earnings – Does this concern you? NEXT STEPS